Morning Thoughts – LNG going strong

Looks as thought Sabine Pass and Cameron LNG export facilities both have tankers docked and probably loading up. LNG pipeflows are at a new recent high. Prices are soaring. 8.27Bcf/d according to RonHenergy.com This would imply, at current production levels, that the natgas storage surplus will get used up by the end of winter if not sooner.

There is presently a 353Bcf surplus of gas to the 5 year average according to EIA.gov. We are currently in week 42 of the year, and we have until week 13 before draw season will end. Not that the timeline really matters, but it is a good target to start with. Anyway, this would be 23 weeks, or roughly 160 days from now. To reduce 353Bcf to 0 in 161 days, this would only take 2.2Bcf/day. The US is currently consuming/exporting barely less than last year right now (sorry for being vague, I can’t share numbers that you must pay for). If we look at RonHenergy.com again, Ron is has all the numbers by EIA.gov

Year over Year comparison for week 41 2019vs2020 at RonHenergy.com

The above table is just a comparison for only week 41 from this year to last year. You can see Power Consumption (power burn) is -5.1. This can swing wildly with weather changes from week to week. So it is best to just look at storage changes themselves.

Weekly Natgas storage changes vs the 5 year average at RonHenergy.com

click the image for a larger view of the chart. This shows the change in storage vs the 5 year average; week 41 is the last dot plotted on the white line for 2020. There was a large drop from week 40 to week 41; power burn being so strong vs last year has a lot to do with this drop. But if not for weak production numbers, this would also not have been possible.

If production continues to be weak and LNG continues to stabilize above 8Bcf/d of demand, then the storage surplus will be wiped out very soon. Correction; we are in week 43, and the EIA will report on week 42 tomorrow. But in week 41 you can see there was a drop in storage vs the 5 year average by 41Bcf! This is insane. If there were to be 41Bcf more gas consumed than the 5 year average for the next 23 reports…. This would leave a deficit of 590ish Bcf! Just by end of draw season! Why did I reduce UNL?

Remember that power burn helped as well, which won’t always be the case. I highly doubt there will be a storage deficit of 590Bcf by the end of winter, but it is possible. There are even stronger consumption periods on that same chart. I can accept that winter may not bring a lot of cold to boost winter demand, and I can accept that production may improve some. Even at that, the storage surplus/deficit will depend upon LNG continuing at the pace it is being exported. That requires a global look at storage and I don’t have time for that. All in all, there is still a strong bull case scenario here, even if there are many hiccups along the way.

My positions as of 10/21/20

My Webull example account is still about $75 in the hole since I started it and started sharing trades from there. You think if I were so good at trading gas, I would have performed better. I took way too big a bet, way too soon and it hurt me. So if anything, you might have learned that you shouldn’t take such big bites all at once (or at all).

I am planning to hold were I’m at. I believe UNL has another $0.50 to $1 to move higher by spring of next year and SLB will stabilize at soon enough for me to work that back into a profit. I think what I am going to do today is purchase 10 more shares of SLB.

SLB on daily chart at Webull

This chart won’t let me draw on the RSI indicator, but it has a double bottom that has formed. It might be worth a little extra with a stop just below the recent lows of $14.90. So how about 30 shares. 10 shares just isn’t enough influence, and I can afford 30 without any problems of margin or pain as long as I use that stop. Good Luck

Oldinvestor

Morning Thoughts – All eyes on LNG

Did I mention there was an oil rig sunk in the Calcasieu Ship Channel. This is the path to the Cameron LNG export terminal. Cameron is still flowing gas into their facility at the moment, probably expecting the Corp of Engineers to clear the sunken boat soon. There is also another rig that “drifted into the Sabine Bank Channel” but has not sank. That is “being investigated”, and probably moved as soon as possible. It is also not completely clears as to whether other boat traffic is simply allowed yet to just fairy past the stalled boat. There is an LNG tanker at Sabine Pass, but it may also be waiting to leave. Hmmm.

Prices are up this morning. LNG is flowing to all export facilities, so this is a good sign. If I were holding UNG, I would probably be looking for a reduction. I will continue to hold UNL, as many spring/summer prices are still near or below $3. I feel like even summer 2021 prices will get to $4 before production is back on its feet again. That’s still going out on a limb, because storage must get used up in order for summer of 2021 to get anywhere closer to $4. But that is my big bet moving into next year.

Futures pricing vs Storage surplus/deficit at EIA.gov

I’ve mentioned this chart in a few posts already, but it’s worthy of sharing at least once a week. Storage is at a surplus, but is on the decline in relation to the 5 year average. “Near-month futures prices” are in the upper/middle of the range for this chart. The storage surplus is shrinking still, no matter what is going on with LNG. LNG is mostly back on track and looking to increase output. At that point, it will be a matter of how fast do we climb out of the surplus hole and start digging a deficit. The price will adjust according to this chart. It is right here and is proven all the way back to 2012. Since storage is headed toward a deficit with 2021 now backward to 2020 contracts…. and.. it should take a while for production to ramp back up… In the mean time, prices should get pulled up through the next 6 months to a year. I gotta go.

Current Positioning as of 10/19/20 and 10/20/20 pre market

I’m still holding what I have. I feels it’s a bit too late now to enter UNG. Figures this would happen. I’m happy to hold where I am. Good Luck

Oldinvestor

Morning Thoughts

There has been some return in production, now clearly back above 2018 levels. If there is extra gas to be brought to market, it happens in winter. Though it would seem a bit early, of the producers that have been waiting for the right moment, to bring that gas online now. Henry Hub cash prices are still closer to $2 than they are to $3… Still 3 weeks to go (this week and two more) until storage normally peaks. South Central storage is not building as fast as it normally does this time of year, thanks to lack of production and relatively strong LNG demand. I suspect thought, that since South Central is still building storage, Henry Hub will continue to be weak until draw season arrives.

I remember vaguely someone who may have traded natgas for a living, or traded energy related products for a living, mentioning that Henry Hub was no longer the defacto standard for NYMEX natgas pricing. Right now is making a strong case for this, as cash is closer to $2, and prompt natgas pricing is closer to $3. I would think to be careful of November moving closer to $2.5 this week, getting close to expiration.

UNL and SLB positions as of pre-market 10/19/20 and KOLD as of market close 10/16/20

I’ll be holding off from buying UNG for one more day. I am holding my positions because of higher production numbers and weak cash price due to storage. And I have another call…

Back again… I’m really split on wanting start a position in UNG. I’m going to wait. I’m going to hold what I have, even my terrible SLB position. My mind is also split in too many directions this morning to focus, it’s a good time to wait. Gas has gone from red to green and back to red again, I’m not so interested yet in buying UNG.

  • Storage still sucks
  • LNG isn’t that great but is showing improvement
  • Production just increased
  • Weather isn’t all that important yet
  • Winter prices are a bit high for sucky storage

Prices have room to come down some before I buy UNG. I want to wait… Again… Good luck

Oldinvestor

Morning Thoughts – Oldinvestor

Everyone and their sister is projecting that storage is going to move much closer to the 5 year average over the next 4 weeks. Like 100+Bcf closer… easy… in 4 weeks… Prices should continue to inch higher. I want to dump UNL on the chance that there may be a small dip, but there is no way I’m doing that. The chances of UNL going to $10 is not so strong yet; summer 2021 contracts are just under $3. But this should slowly shift higher as storage gets swallowed up. The natgas market has already shifted to a bullish mindset. Managed money has been long in a big way for a while now.

DCOT Long vs Short positioning at RonHenergy.com

I’m ready to start playing the market back and forth more, I should not be such a permabull. Or I can be permabull and still accept there will be dips in the price. I think I’m going to give BOIL a chance. BOIL has rolled to January contract, so the storage drama will not effect BOIL. In fact, the last two days UNG has made larger % moves than BOIL because UNG is still partially invested in November contract, while rolling out to December. Nov/Dec contracts are just moving that much more wildly than Jan. And the reality is, I could have also made money on UNL; trading it back and forth this whole time, I mean…. So maybe I should reduce a bit today, and start buying UNG/BOIL on any dips.

Positioning as of pre-market 10/16/20, KOLD position as of market close 10/15/20

Looks like KOLD position is up, but I’m sure I could not get out of the trade for that. I may hold on to that one for a while.

So my mind is made up. I know I’ll change it again before the day is over, but right now I’m going to reduce UNL by 20 shares to an even 100 shares. I will most likely hold the 100 shares of UNL, and simply add to my account with UNG. I am going to wait until next week to buy anything. So today is a reduction of UNL. Oh, and I exited LABU, that was cool that I was able to short it, and even made $3.5, but focus…. As for the market itself. Natgas couldn’t get much more wild that it already has the last few months. I do expect things to settle just a bit, but also expect a big bull run at some point. Storage will dictate the size of the move and how long it lasts. Trade small. Good Luck

Oldinvestor

Morning Thoughts – Oldinvestor

I’ve shorted KOLD and sold a put that expires in February. I also shorted 1 share of LABU because I could and because it seemed like a good deal. Turns out I was right for a day anyway.

Positions as of premarket 10/15/20 except KOLD is previous close

It’s the same story with Natgas. Production is coming back a little, I’m sure most of this is GOM (gulf of Mexico) coming back online. LNG is still strong, but the global market for natgas is still heavily supplied and near full on storage. I did retweet a headline I saw from Javier Blas, mentioning double heating. If half of an office is working from home, the heat will get kept on in homes and in offices this winter. This will not be enough to change markets, but could help by a few Bcf/d across the world. The Northern Hemisphere still needs a cold winter to use up some extra storage globally.

Either way, I’m staying long. Perma-bull until March anyway, and probably then as well. I’ll remain long UNL. I guess it’s time to just start buying UNG. The only thing that is concerning is Henry Hub cash prices. HH cash is staying close to $2. This could cause problems for November contract. By Monday, UNG will have fully rolled into December contract. FOMO (fear of missing out). I feel like if I don’t get in UNG now, I’m going to miss out on the next big move. I’m in UNL, and need to just stay in that until next week. I’ve been so patient, and it’s been boring and I haven’t made a dime, but I’ve held on… So I’ll keep holding for a few more days. Then back to chaos. It’s EIA day today. Good Luck

Oldinvestor